Total vested account balance is $200,000.00

Current loan balance is $23,000.00

Highest outstanding loan balance in past 12 months is $25,000.00

Participant would like to refinance this loan and pull the maximum amount out allowed for a loan.

Can someone tell me what the max. allowed would be?

Thank you.

I have a client who has a 403b (no match) and maxing out contribution. She also participates in employers Cash Balance Plan. In addition, she has 50-75k of self-employment income. I was thinking of setting up solo 401k or SEP plan but didn't know if cash balance contribution 13K would impact her contribution to self employment plan. Please advise.

Rick S

Westborough, AM

I have a client who has a 403b (no match) and maxing out contribution. She also participates in employers Cash Balance Plan. In addition, she has 50-75k of self-employment income. I was thinking of setting up solo 401k or SEP plan but didn't know if cash balance contribution 13K would impact her contribution to self employment plan. Please advise.

Rick S

Westborough, AM

I am a TPA that has a client with a one participant/owner only plan that I have filed 5500EZ forms on for all years since the plan assets were over $100,000. The plan has had undeveloped property as an asset for which the tax valuation has been recorded in the plan each year. No contributions have been made to the plan in over five years so I called the client to discuss the process of terminating the plan and rolling the assets to an IRA. In discussing this process with her, I mentioned that she must make a decision on the property, whether to establish a separate IRA for it or to sell it to a disinterested third party and put the proceeds back into the plan, then roll all to an IRA. The client then notified me that she had transferred the property to herself from the plan back in 2003 through a deed transfer for a grand sum of $10. The tax valuation is 27,000. What is the best way to handle this? Do I go back and amend the prior years 5500s back to 2003. What penalties/interest will there be on the non filing of the 1099-R and the taxes due for the distribution to her? I asked her real estate attorney to refer her to an ERISA attorney because I really did not want to have to deal with this problem. The ERISA attorney said he could not help her. Thank you for any assistance you can provide.

I have a client who has a 403b (no match) and maxing out contribution. She also participates in employers Cash Balance Plan. In addition, she has 50-75k of self-employment income. I was thinking of setting up solo 401k or SEP plan but didn't know if cash balance contribution 13K would impact her contribution to self employment plan. Please advise.

Rick S

Westborough, AM

Guess this is a moral dilemma as much as a legal one...

participant is in ill health. relative claims to have POA to handle participants financial affairs and asks about withdrawing funds to pay for care. client has been in contact with participant since intial inquiry and participant was unaware that the request was made. participant was somewhat disturbed to hear that 401k was intending to be tapped as his goal was to recover and spend his own money. Must the plan honor the POA if participant gave verbal disapproval?

Intent of request by individual with POA was to distribute balance in two pieces..cash to pay for short term care and rollover of remaining balance to IRA in participant's name with beneficiary being same beneficiary as with the plan (not the person who has POA). So I don't question the motives....just not sure what to do since we know it's not the participants desire.

What do we do? Recommend to participant that the POA to be amended to not include the plan? Honor the POA? Stick head in sand and sing "Ob la di" until the participant passes away and issue is resolved? Seems to me that none of those are truly beneficial to anyone.

I have an excellent technical background and am thinking about opening my own TPA firm (non-producing). Hopefully people don't mind sharing, but I have two main questions. How do you drum up the most amount of business? Is it mostly through financial advisors? Are there tactics that work over others? Additionally, how do you decide what to actually charge people?

Finally do most of you guys use your own recordkeeping software, or do you use the products offered by some of the larger recordkeepers? Which recordkeepers do you recommend?

Thanks for any help people can give!

I am a bit confused about the effect of 409A on earnings on vested 457(f) amounts. These earnings are not considered "wages" for FICA tax purposes, which suggests that the amounts are not remuneration for services but are more like investment income. However, under 409A (and explicitly provided in the new preamble), these amounts are "deferred compensation" subject to 409A. Can anyone help me understand this disconnect?

Also, the provision in 1.409A-3(e) seems to indicate that if a 457(f) plan establishes an appropriate accounting procedure, it would be possible for the plan to distribute "principal" (i.e., vested deferrals, already taxed) and continue to defer post-vesting earnings until a later date. This appears contrary to 1.457-11(a)(4), which would tax distributions proportionately under the annuity rules.

Any thoughts?

The regs provide various categories of plans that must be aggregated. There's a separate category for involuntary separation pay plans and window payments. However, it's not entirely clear which category voluntary separation pay plans should fall under.

The "catch all" category kind of seems like the correct category for voluntary separation pay plans, but it seems that the categories were created as carve-outs to a broader rule requiring aggregation. Does anyone know whether the IRS has taken a position on which category voluntary separation pay plans should fall under?

QDRO is issued in 2000. Document holds that Participant's Spouse is due a specific dollar sum, payable on or before a specific date in 2001. Election package is provided prior to that date, but Spouse never responds thinking that since the amount is under $5,000 (apparrently notice of administrative service used by plan at that time must have stated that), the monies will just be paid without an election. That did not happen. Now Spouse is contacting Plan with an election, and demands an interest adjustment. While that sounds reasonable, how do you compute that value (actual experience)? Can you even do this since QDRO originally stated a dollar sum and has no reference to any form of interest adjustment? Is a new QDRO needed or can parties come to some form of agreement, without creating either legal or tax problems for the plan and people involved?

Any help would be greatly appreciated!

State Conformity to the Federal Tax Treatment of HSAs --

The TRHCA of 2006 made changes to the HSA rules, which are generally effective for taxable years beginning after December 31, 2006. A State's conformity with the Code will indicate whether the State conforms to the recent changes to the new HSA new rules that follow:

• Modifies the limit on contributions to HSAs, so that it is not limited to the annual deductible of the high deductible health plan ("HDHP"); instead, contributions would be limited only by indexed dollar amount ($2,850 self-only and $5,650 family for 2007; $2,900 self-only and $5,800 family for 2008).

• Allows individuals who become covered by a HDHP after January to contribute up to the full annual limit, even if they were only eligible individuals for a portion of the taxable year.

• Permits an individual to transfer the balance remaining in his or her FSA or HRA account as of September 21, 2006 (or, if less, the balance on the date of the transfer) to an HSA. The transfer must be made before January 1, 2012.

• Requires the Secretary of Treasury to announce the cost-of-living adjustments applicable to HSAs by June 1 of each year. This change is effective for tax years beginning after 2007.

• Allows coverage under a health FSA during the "2-1/2 Month Grace Period" to be disregarded for eligible individuals who have a zero balance in their HSA at the end of the previous calendar year.

• Allows employers to make contributions to HSAs on behalf of non-highly compensated employees in higher amounts (or higher percentages of deductibles) than to highly compensated employees without violating the comparable contribution rules.

• Allows individuals to make a one-time distribution to rollover amounts from an IRA to an HSA, subject to the HSA contribution limit.

In general, a majority of States conform their state income tax laws to the federal income tax rules set forth under the Internal Revenue Code of 1986, as amended (the "Code"). A number of these States incorporate the Code by reference, conforming to any and all amendments made to the Code. Other States conform to the Code as of a specified date. In this instance, a State will generally not conform to amendments made to the Code after this specified date. Only until the respective State legislature updates the date of conformity with the Code under the State's statute will the State conform to recent changes made to the federal tax laws. As a practical matter, however, unless a State amends its tax forms and instructions requiring taxpayers to, for example, "add back" HSA contributions that are otherwise deductible or excludible under federal law, it is unlikely that the State will pursue the collection of tax on these unreported amounts.

As a consequence, there are several states in which the state tax consequences of HSA participation differ from the federal tax consequences (for example, where HSA employer contributions that are excludable for federal tax purposes are required to be included in income, where interest earned on the HSA is taxed, or where deduction for state tax purposes is not available).

See Chapter 8 and Appendix G (a 35 page chart) in the Health Savings Account Answer Book (4th Edition, in Press) for more specific information regading whether a particular State conforms to the Code, and the date upon which conformity is enumerated in the State's statute (if any).

My understanding (as of SEPTEMBER 28, 2007) is as follows:

Alabama -- Generally No--Fed Tax / No--TRHCA '06

Arizona -- Yes--Fed Tax / No--TRHCA '06

Arkansas -- Yes--Fed Tax / No--TRHCA '06

California -- No--Fed Tax / No--TRHCA '06

Georgia -- Yes--Fed Tax / No--TRHCA '06

Indiana -- Yes--Fed Tax / No--TRHCA '06

Iowa -- Yes--Fed Tax / No--TRHCA '06

Massachusetts -- Yes--Fed Tax / No--TRHCA '06

Minnesota -- Yes--Fed Tax / No--TRHCA '06

New Jersey -- No--Fed Tax / No--TRHCA '06

Ohio -- Yes--Fed Tax / No--TRHCA '06

Oregon -- Yes--Fed Tax / No--TRHCA '06

Vermont -- Yes--Fed Tax / No--TRHCA '06

Wisconsin -- Yes--Fed Tax / Yes--TRHCA '06: Senate Bill 2, brings Wisconsin into alignment with federal law and tax code provisions in most states. Wisconsin was one of only five states that failed to permit tax deductions for HSAs. S.B. 2 passed the Senate Jan. 20, 2011, by a vote of 20-13. The measure won support in the House later in the day by a vote of 66-28.

ALL OTHERS -- Yes--Fed Tax / Yes--TRHCA '06

STATES WITHOUT PERSONAL INCOME TAXES: Alaska, Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

Two questions: Hopefully easy ones:

Under what circumstances can a plan switch from the prior year method to the current year method for testing? Does this require a change to the plan document?

I'm looking for an inexpensive source for current IRS Code Regulations. Does anyone have any suggestions?

I'm a small TPA. Just starting out.

Thanks!

Fender5150

The employer (county owned hospital) is changing from a governmental entity to a 501c3, and as a result can't continue to use the governmental 457b plan. Can this plan be terminated and employees given the option of rolling over their funds to an IRA or the new 401k/403b arrangement, or must the employer freeze the plan and only pay out benefits when a reason for distribution is met?

The participant named his spouse as primary beneficiary and his son as contingent beneficiary. The beneficiary designation form does not say under what conditions the contingent beneficiary will receive the death benefit nor does the plan. The plan document's beneficiary hierarchy is the spouse then the participant's estate if the participant does not designate a beneficiary.

The participant died before his required beginning date and the spouse disclaimed the death benefit before 9/30 of the year after participant's death. Who gets the death benefit the contingent beneficiary or the estate?

I always view a contingent beneficiary as an individual who would get the death benefit if the primary beneficiary(ies) were to die. I can find no cite that would state otherwise. I assume that the beneficiary designation form could specifically state that the contingent beneficiary receives the death benefit if the primary beneficiary dies or disclaims the death benefit, but that is not the case in this scenario.

Thanks.

I'm not an expert by any means in the area of NQDC, but know just enough to be dangerous...I'd previously heard that there were several circumstances that could put a NQ plan (or the NQ participant) at risk for taxation for amounts deferred on behalf of the participant.

Assuming it's a program that looks like a 401k and recordkept by a professional recordkeeper, I think I'd heard that having participants exercise 'too much control' (perhaps as in daily transaction access capability), and/or having the participant accounts 'fully funded' (with the mutual funds tracked) were indications that the participant exercised control that could result in constructive receipt.

There may be other conditions that were mentioned as well, but I suspect that those were the two that drew my attention the most...

Are those two things mentioned (daily access and full funding) real issues for NQ plans? Thanks for any info.

Company A sponsors 401(k) plan that provides for immediate 100% vesting of employer matching contributions. Company B's plan provides that employer matching contributions are subject to 3-year cliff schedule. Company A's 401(k) will merge into Company B 401(k) plan. Do participants of Company B who have at least three years of service at time of merger have the right to remain on the 100% immediate vesting schedule for employer matching contributions post-merger? ERISA Outline Book indicates yes. Is this the consensus interpretation of Code § 411(a)(10)(B)?

I'm the consultant on a stand alone profit sharing plan, no EE deferrals permitted.

The client uses a discretionary formula.

Past years they have made annual contributions in the area of $15,000 - $20,000.

2004 they did one for $5,000, and zero for 2005 and 2006.

Does the discretionary formula allow for this, or would their still be a "substantial and recurring" issue?

Thanks in advance.

403(b) funded with individual contracts. The intent is to establish a new 403(b) funded by a group investment arrangement, including employer contributions mid-year (7-1-07). The employer wants to go safe harbor for ACP (employer contributions in the 403(b)) mid-year.

Are the rules applicable to 403(b) safe harbors the same as 401(k) in that there must be at least 3 months left in the plan year for a new plan, UNLESS the new plan is a successor plan, in which case must be 12 months. Would this second 403(b) arrangement be considered a successor plan?

Is the solution to make the second 403(b) plan year 7-1 to 6-30 and then change the plan year in subsequent years if needed?

As a result of a divorce setlement, my husband needs to pay my health insurance through his company.

That time will soon end.

How long do I have after that date to enroll in some sort of COBRA plan to prevent any lapse in coverage before I arrange for my own health insurance?

What would happen if my original coverage were to lapse before I had filled out a COBRA application and to require treatment?

Would such treatment be covered retroactively if it were to occur within 1 or 2 months of my original health care plan expiring?

Hoping somebody can help me out. I must be missing a wrinkle or something obvious but do not recall hearing this issue specifically addressed and do not see in the final regulations a way to cover an employee under the 2 times pay separation pay plan exception if the employee was hired in the same year as the year of termination and thus had no compensation from the service recipient in the the year prior to the termination year.

Is it supposed to be the case that the separation pay plan exception only applies to employees that were employed with the employer for at least part of the preceding year or is this interpreted as simply allowing 2 times the employee's annual rate of pay at time of termination in such situations? Unfortunately, the terms in the final regulations do not appear to be defined or cross-referenced in a way that helps clarify this issue.